The chief executive of Merrill Lynch & Co expects emergency measures by US and international authorities designed to unfreeze lending to succeed, but said more pain awaited the financial sector.

Banks will need to raise capital and merge as the US economy sinks into recession and fallout from the credit crisis, which forced Merrill into the arms of Bank of America Corp. in a $50 billion deal, lasts for years, John Thain said on Monday at a roundtable discussion in Dubai.

"It is likely to take multiple years to repair the damage that has been done," Thain said. "This is not going to get better in three to six months."    

"I do believe that the actions of the Fed, the Treasury and the FDIC (Federal Deposit Insurance Corp) have solved the concerns about the US financial system. I believe that those actions ... will all start to unblock and unfreeze the credit markets," he said.

Pressure is mounting on banks to fortify their capital bases as consolidation pressure intensifies in the US financial sector, he said.

"There will be more consolidation in the banking industry in the United States. There are some limits to what any of the big banks can do. There is no question that there will be many small and medium-sized institutions that need to be re-capitalised," he said.

Fiscal actions by governments to alleviate the effects of the crisis will prove key in determining how much economies are suffering, Thain said, adding that even high-growth emerging economies would not escape.

"The only question is how deep the recession is and how long. All parts of the world are affected. There is no question of decoupling," he said. Separately, Thain said his bank's merger was on track and that Merrill expected to open offices in Qatar and Kuwait by the end of the year. - Reuters